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High Inflation, 401K’s and Cryptocurrency

High inflation is the most forecasted thing that has been expected to occur over pretty much the last 15 years. Everybody’s been saying we’re going to get higher inflation. These low-interest rates can’t last. Low-interest rates and low inflation tend to go hand in hand. You don’t get high interest rates typically without high inflation because interest rates go up to compensate for how much you’re losing on your dollars from inflation. The idea is that if inflation begins to climb, interest rates will tend to climb. Also sometimes there’s a lag. You begin to get inflation going up before you really get interest rates going up. Interest rates going up is typically rate is always accompanied by dropping bond prices because the only way you make bonds yield more is that the coupons on most bonds are so low that once rates start to go up, they will drop to a discount very quickly. They drop even harder because your duration really lengthens out, and you’re not getting much coupon income, because the coupon is already so low. It almost performs like a zero-coupon bond that just gets murdered. When you get higher interest rates, so you know the in here. They’re saying that we did have a reading yesterday or the day before, of a 5% annualized rate of inflation. Many people think It’s understated.  Inflation is a psychological phenomenon, every bit as much it is a monetary phenomenon but if you jack with the money supply long enough you can get the psychology going in favor of inflation.

https://money.usnews.com/investing/news/articles/2021-06-09/column-inflation-warnings-are-mostly-just-in-case

https://www.barrons.com/articles/this-small-401-k-provider-and-coinbase-will-offer-cryptocurrencies-in-retirement-plans-what-to-know-51623703025

It’s the loss of compounding, which is even more expensive, so let’s say you’re a 28-year-old worker, you’ve been working at a place for five years you have a $10,000 401k and you switch jobs, and you just leave it in the old 401k And you move on to your next job, life happens, and it just essentially you’re getting statements you know it’s there, but it’s, you just don’t want to go through the trouble to consolidate, to talk to somebody… to actually be prudent, with, with your savings. That’s a huge problem that should be mandatory in every high school across the country to understand. Just understand the concepts of money, and returns. The cost of debt, the opportunity of returns, and what that translates to overtime. But if it’s a $10,000 account, that’s just been stranded not managed, as I said just sitting in bonds, or a low quote-unquote low risk, holding. You’re not going to be making anything on it. And the problem is you’re missing out on 25-30 years of compounding potential compounding returns which and if you compound that at 6%, over 30 years, you’re talking 10s of 1000s of dollars of your $10,000. So, yes, okay, you think of a first say well it’s just $10,000. I’ll take care of that some other point. Five years later, and you’ve missed out on all that compounding.

They’re beginning to allow you to talk about different ways to invest, beginning to allow cryptocurrencies, in some 401 K’s.

 

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